February 20, 1997
THE CAROLINASFUND
Supplement to Prospectus Dated June 20, 1996
The third and fourth paragraphs in the section entitled "Management of the Fund"
on page 13 are revised as follows:
The Advisor is controlled by a management group consisting of Robert B.
Thompson, Benjamin Richter and Lloyd Richter. The Advisor's address
is 1712 East Boulevard, Charlotte, North Carolina.
Mr. Thompson is primarily responsible for managing the portfolio of the Fund and
has acted in this capacity since October 1996. Mr. Thompson has served as
President of the Advisor since 1994. From 1993 until 1995 he was President of
Morehead Investment Advisors, a registered broker-dealer, and from 1987 until
1992 he was a Senior Vice President of Barclays Bank of North Carolina.
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STATEMENT OF ADDITIONAL INFORMATION
THE CAROLINASFUND
June 20, 1996
Amended February 20, 1997
A Series of
MAPLEWOOD INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone 1-800-934-1012
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES.............................................2
INVESTMENT LIMITATIONS........................................................4
TRUSTEES AND OFFICERS.........................................................6
INVESTMENT ADVISOR............................................................9
ADMINISTRATOR................................................................10
DISTRIBUTOR..................................................................11
OTHER SERVICES...............................................................12
BROKERAGE....................................................................12
DISTRIBUTION PLAN UNDER RULE 12b-1...........................................14
SPECIAL SHAREHOLDER SERVICES.................................................16
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................17
HOW SHARE PRICE IS DETERMINED................................................18
ADDITIONAL TAX INFORMATION...................................................19
DESCRIPTION OF THE TRUST.....................................................21
CALCULATION OF PERFORMANCE DATA..............................................23
ADDITIONAL INFORMATION ON NORTH AND SOUTH CAROLINA...........................26
APPENDIX A - DESCRIPTION OF RATINGS..........................................27
FINANCIAL STATEMENTS AND REPORTS.............................................32
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus dated June 20,
1996 for The CarolinasFund (the "Fund"). Copies of the Fund's
Prospectus may be obtained at no charge from the Fund, at the address
and phone number shown above.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described
in the Prospectus. Supplemental information about these policies
is set forth below. Certain capitalized terms used but not
defined have the same meaning as in the Prospectus. A
description of the various ratings used by the nationally
recognized statistical rating organizations ("NRSROs") for
securities in which the Fund may invest is included in this SAI
as Appendix A.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase transaction occurs when, at the time
the Fund purchases a security (normally a U.S. Treasury
obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve System or a registered Government
Securities dealer) and must deliver the security (and/or
securities substituted for them under the repurchase agreement)
to the vendor on an agreed upon date in the future. Such
securities, including any securities so substituted, are referred
to as the "Repurchase Securities." The repurchase price exceeds
the purchase price by an amount which reflects an agreed upon
market interest rate effective for the period of time during
which the repurchase agreement is in effect.
The majority of these transactions run day to day and the
delivery pursuant to the resale typically will occur within one
to five days of the purchase. The Fund's risk is limited to the
ability of the vendor to pay the agreed upon sum upon the
delivery date; in the event of bankruptcy or other default by the
vendor, there may be possible delays and expenses in liquidating
the instrument purchased, decline in its value and loss of
interest. These risks are minimized when the Fund holds a
perfected security interest in the Repurchase Securities and can
therefore sell the instrument promptly. Under guidelines issued
by the Trustees, the Advisor will carefully consider the
creditworthiness during the term of the repurchase agreement.
Repurchase agreements are considered as loans collateralized by
the Repurchase Securities, such agreements being defined as
"loans" under the Investment Company Act of 1940 (the "1940
Act"). The return on such "collateral" may be more or less than
that from the repurchase agreement. The market value of the
resold securities will be monitored so that the value of the
"collateral" is at all times as least equal to the value of the
loan, including the accrued interest earned thereon. All
Repurchase Securities will be held by the Fund's custodian either
directly or through a securities depository.
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DESCRIPTION OF MONEY MARKET INSTRUMENTS. Money market
instruments may include U.S. Government Securities or corporate
debt securities (including those subject to repurchase
agreements) as described herein, provided that they mature in
thirteen months or less from the date of acquisition and are
otherwise eligible for purchase by the Fund. Money market
instruments also may include Bankers' Acceptances and
Certificates of Deposit of domestic branches of U.S. banks,
Commercial Paper and Variable Amount Demand Master Notes ("Master
Notes"). Bankers' Acceptances are time drafts drawn on and
"accepted" by a bank, are the customary means of effecting
payment for merchandise sold in import-export transactions and
are a source of financing used extensively in international
trade. When a bank "accepts" such a time draft, it assumes
liability for its payment. When the Fund acquires a Bankers'
Acceptance, the bank which "accepted" the time draft is liable
for payment of interest and principal when due. The Bankers'
Acceptance, therefore, carries the full faith and credit of such
bank. A Certificate of Deposit ("CD") is an unsecured interest-
bearing debt obligation of a bank. Commercial Paper is an
unsecured, short term debt obligation of a bank, corporation or
other borrower. Commercial Paper maturity generally ranges from
two to 270 days and is usually sold on a discounted basis rather
than as an interest-bearing instrument. The Fund will invest in
Commercial Paper only if it is rated in one of the two highest
rating categories by any NRSRO or, if not rated, is of equivalent
quality in the Advisor's opinion. Commercial Paper may include
Master Notes of the same quality. Master Notes are unsecured
obligations which are redeemable upon demand of the holder and
which permit the investment of fluctuating amounts at varying
rates of interest. Master Notes are acquired by the Fund only
through the Master Note program of the Fund's custodian, acting
as administrator thereof. The Advisor will monitor, on a
continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
ILLIQUID INVESTMENTS. The Fund may invest up to 10% of its net
assets in illiquid securities, which are investments that cannot
be sold or disposed of in the ordinary course of business within
seven days at approximately the prices at which they are valued.
Under the supervision of the Board of Trustees, the Advisor
determines the liquidity of the Fund's investments and, through
reports from the Advisor, the Board monitors investments in
illiquid instruments. In determining the liquidity of the Fund's
investments, the Advisor may consider various factors including
(1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security
(including any demand or tender features) and (5) the nature of
the marketplace for trades (including the ability to assign or
offset the Fund's rights and obligations relating to the
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investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder
to payment of principal and interest within seven days and
restricted securities. If through a change in values, net assets
or other circumstances, the Fund were in a position where more
than 10% of its net assets were invested in illiquid securities,
it would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES. Within its limitation on investments in
illiquid securities, the Fund may purchase restricted securities
that generally can be sold in privately negotiated transactions,
pursuant to an exemption from registration under the federal
securities laws, or in a registered public offering. Where
registration is required, the Fund may be obligated to pay all or
part of the registration expense and a considerable period may
elapse between the time it decides to seek registration and the
time the Fund may be permitted to sell a security under an
effective registration statement. If during such a period,
adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to
seek registration of the security.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment
limitations, which cannot be changed without approval of the
holders of a majority of the outstanding voting shares of the
Fund. When used in the Prospectus or this SAI, a "majority" of
shareholders means the vote of the lesser of (1) 67% of the
shares of the Trust (or the Fund) present at a meeting if the
holders of more than 50% of the outstanding shares are present in
person or by proxy, or (2) more than 50% of the outstanding
shares of the Trust (or the Fund). Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
(1) Issue senior securities, borrow money, or pledge its assets,
except that it may borrow from banks as a temporary measure
(a) for extraordinary or emergency purposes, in amounts not
exceeding 5% of its total assets or (b) in order to meet
redemption requests in amounts not exceeding 15% of its
total assets. The Fund will not make any further
investments if borrowing exceeds 5% of its total assets
until such time as total borrowing represents less than 5%
of Fund assets.
(2) Invest for the purpose of exercising control or management
of another issuer;
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(3) Purchase or sell commodities or commodities contracts, real
estate, (including limited partnership interests, but
excluding readily marketable securities secured by real
estate or interests therein, readily marketable interests
in real estate investment trusts, or readily marketable
securities issued by companies that invest in real estate or
interests therein) or interests in oil, gas or other mineral
exploration or development programs or leases (although it
may invest in readily marketable securities of issuers that
invest in or sponsor such programs or leases).
(4) Underwrite securities issued by others, except to the extent
that the disposition of portfolio securities, either
directly from an issuer or from an underwriter for an issuer
may be deemed to be an underwriter under the federal
securities laws.
(5) Invest in warrants, valued at the lower of cost or market,
exceeding more than 5% of the value of the Fund's net
assets. Included within this amount, but not to exceed 2%
of the value of the Fund's net assets, may be warrants which
are not listed on the New York or American Stock Exchange;
warrants acquired by the Fund in units or attached to
securities may be deemed to be without value;
(6) Participate on a joint or joint and several basis in any
trading account in securities;
(7) Purchase foreign securities;
(8) Invest more than 10% of its total assets in the securities
of one or more investment companies; or
(9) Make loans of money or securities, except that the Fund may
(i) invest in repurchase agreements and commercial paper;
(ii) purchase a portion of an issue of publicly distributed
bonds, debentures or other debt securities; and (iii)
acquire private issues of debt securities subject to the
limitations on investments in illiquid securities.
The following investment limitations are not fundamental, and may
be changed without shareholder approval. As a matter of
nonfundamental policy, the Fund may not:
(1) Invest in securities of issuers which have a record of less
than three years' continuous operation (including
predecessors and, in the case of bonds, guarantors) if more
than 5% of its total assets would be invested in such
securities;
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(2) Invest more than 10% of its net assets in illiquid
securities. For this purpose, illiquid securities include,
among others (a) securities for which no readily available
market exists or which have legal or contractual
restrictions on resale, (b) fixed time deposits that are
subject to withdrawal penalties and have maturities of more
than seven days, and (c) repurchase agreements not
terminable within seven days;
(3) Invest in the securities of any issuer if those officers or
Trustees of the Trust and those officers and directors of
the Advisor who individually own more than 1/2 of 1% of the
outstanding securities of such issuer together own more than
5% of such issuer's securities;
(4) Write, purchase or sell puts, calls, straddles, spreads, or
combinations thereof or futures contracts or related
options;
(5) Make short sales of securities or maintain a short
position, except short sales "against the box." A short
sale is made by selling a security the Fund does not own.
A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no
additional cost securities identical to those sold short.
(While the Fund has reserved the right to make short sales
"against the box", the Advisor has no present intention of
engaging in such transactions at this time or during the
coming year); or
(6) Purchase any securities on margin except in connection with
such short-term credits as may be necessary for the
clearance of transactions.
Whenever any fundamental investment policy or investment
restriction states a maximum percentage of assets, it is intended
that if the percentage limitation is met at the time the
investment is made, a later change in percentage resulting from
changing total or net asset values will not be considered a
violation of such policy.
TRUSTEES AND OFFICERS
Following are the Trustees and executive officers of the Trust,
their present position with the Trust or Fund, age, principal
occupations during the past 5 years and their aggregate
compensation from the Trust for the fiscal year ended February
29, 1996:
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<TABLE>
<C> <C> <C>
Name, Position, Principal Occupation(s) Compensation
Age and Address During Past 5 Years From the Trust
John P. Boone (age 64) President None
Trustee* Legacy Advisors, Inc. and
President Legacy Global Advisors, Inc.
Legacy Equity Fund Dallas, Texas
2911 Turtle Creek Boulevard Executive Vice President
Suite 400 Forum Securities, Inc.
Dallas, Texas 75219 Dallas, Texas
Jack E. Brinson (age 64) President, Brinson Investment Co. $6,000
Trustee President, Brinson Chevrolet, Inc.
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886 Trustee, Williamsburg Investment Trust
Cincinnati, Ohio
O. James Peterson III (age 59) Chief Financial Officer $6,000
Trustee Pimlico Race Course
Five Bellona Arsenal Laurel, Maryland; previously
Midlothian, Virginia Senior Vice President, Chief Financial Officer
Dominion Resources, Inc.
Richmond, Virginia
Christopher J. Smith (age 29) President None
Trustee* ObjectTiger Ltd.
867 Thorn Tree Bloomfield Hills, Michigan; previously
Bloomfield Hills, Michigan 48304 Corporate Counsel
Seligman & Associates; Director,
Amelia Earhart Capital Management,
Inc., Southfield, Michigan
Ashby M. Foote III (age 44) President
President Vector Money Management, Inc.
Mississippi Opportunity Fund Jackson, Mississippi
One Jackson Place, Suite 1070
Jackson, Mississippi 39201
Jasen M. Snelling (age 32 ) President
President CityFund Advisory, Inc.; previously
Regional Opportunity Fund: Registered Representative
Ohio Indiana Kentucky PNC Securities Corp.
P.O. Box 54944 Provident Securities Investment Co.
Cincinnati, Ohio 45254 Cincinnati, Ohio
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Robert B. Thompson (age 49) Chief Executive Officer
President Morehead Capital Advisors LLC
The CarolinasFund Charlotte, North Carolina
1712 East Boulevard
Charlotte, North Carolina 28203
Jill H. Travis (age 47) President
President Amelia Earhart Capital Management, Inc.
Amelia Earhart: Eagle Equity Fund Southfield, Michigan
One Towne Square President
Suite 1913 Jill H. Travis, CFP
Southfield, Michigan 48076 Shelby Township, Michigan; previously
Senior Vice President
Huntington Banks, Troy, Michigan
Robert G. Dorsey (age 39) President and Treasurer, MGF Service Corp.;
Vice President Treasurer, Midwest Group Financial Services,
312 Walnut Street, 21st Floor Inc.; Treasurer and Director, Leshner
Cincinnati, Ohio 45202 Financial, Inc.
John F. Splain (age 39) Secretary and General Counsel,
Secretary MGF Service Corp., Midwest
312 Walnut Street, 21st Floor Group Financial Services, Inc. and
Cincinnati, Ohio 45202 Leshner Financial, Inc.; Secretary
Midwest Trust, Midwest Group Tax
Free Trust and Midwest Strategic Trust
Mark J. Seger (age 34) Vice President, MGF Service Corp.
Treasurer and Leshner Financial, Inc.; Treasurer,
312 Walnut Street, 21st Floor Midwest Trust, Midwest Group
Cincinnati, Ohio 45202 Tax Free Trust and Midwest Strategic Trust
_____________________________________
* Indicates that Trustee is an "interested person" for purposes
of the 1940 Act because of his position with one of the
investment advisors to the Trust.
</TABLE>
The officers of the Trust do not receive compensation from the
Trust for performing the duties of their office. Each
disinterested Trustee receives an annual retainer of $2,000 plus
$250 from each series of the Trust for each Board meeting
attended in person and $100 from each series of the Trust for
each meeting attended by telephone. All Trustees are reimbursed
for any out-of-pocket expenses incurred in connection with their
attendance at Board meetings.
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of June 7, 1996, the
Trustees and officers of the Trust as a group owned beneficially
(i.e., had voting and/or investment power) less than 1% of the
then outstanding shares of the Fund. On the same date, Midsouth
Data Systems, Inc. Retirement Trust, 1670 Hendersonville Road,
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Asheville, North Carolina 28803, owned of record 7.5% of the then
outstanding Investor Shares of the Fund; Richter & Co., Inc.,
1712 East Boulevard, Charlotte, North Carolina 28203, owned of
record 5.0% of the then outstanding Investor Shares of the Fund;
Ronald H. Wrenn, 2423 Beretania Drive, Charlotte, North Carolina
28211, owned of record 5.0% of the then outstanding Investor
Shares of the Fund; International Fund for Capitalist
Development, L.P., P.O. Box 30036, Charlotte, North Carolina
28230, owned of record 31.0% of the then outstanding
Institutional Shares of the Fund; Betsy T. Smith, 14201 Allison
Drive, Raleigh, North Carolina 27615, owned of record 21.0% of
the then outstanding Institutional Shares of the Fund; Billie B.
Smith, 14201 Allison Drive, Raleigh, North Carolina 27615, owned
of record 21.0% of the then outstanding Institutional Shares of
the Fund; J.C.B. Ehringhaus, Jr. & J.C.B. Ehringhaus III, 2565
Roswell Avenue, Charlotte, North Carolina 29209, owned of record
13.9% of the then outstanding Institutional Shares of the Fund;
Steve W. Drew & Susan Dee Drew JTWROS, 1129 Dilworth Crescent
Row, Charlotte, North Carolina 28203, owned of record 7.2% of the
then outstanding Institutional Shares of the Fund; and Frank P.
Meadows III, Trustee FBO F.P. Meadows & Company 401K, P.O. Box
69, Rocky Mount, North Carolina 27802, owned of record 6.0% of
the then outstanding Institutional Shares of the Fund.
International Fund for Capitalist Development, L.P. may be deemed
to control the Institutional Shares of the Fund by virtue of the
fact that it owns of record more than 25% of the outstanding
Institutional Shares.
INVESTMENT ADVISOR
Morehead Capital Advisors LLC (the "Advisor") supervises the
Fund's investments pursuant to an Investment Advisory Agreement
(the "Advisory Agreement") described in the Prospectus. The
Advisory Agreement will be renewed for one year periods only so
long as such renewal and continuance is specifically approved at
least annually by the Board of Trustees or by vote of a majority
of the Fund's outstanding voting securities, provided the
continuance is also approved by a majority of the Trustees who
are not "interested persons" of the Trust or the Advisor by vote
cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement is terminable without
penalty on sixty days notice by the Board of Trustees of the
Trust or by the Advisor. The Advisory Agreement provides that it
will terminate automatically in the event of its assignment.
Compensation of the Advisor is at the annual rate of 1% of the
Fund's average daily net assets. The Advisor may be required to
reimburse the Fund if the Fund's annual ordinary operating
expenses exceed certain limits. This expense limitation is
calculated and administered in accordance with the requirements
of state securities authorities. For the fiscal year ended
February 29, 1996, the Advisor waived its entire advisory fee of
$11,386 and reimbursed the Fund $69,248 of expenses in order to
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voluntarily reduce the operating expenses of the Fund. For the
fiscal period ended February 28, 1995, the Advisor waived its
entire advisory fee of $410 and reimbursed the Fund $10,548 of
expenses in order to voluntarily reduce the operating expenses of
the Fund.
The Advisor provides a continuous investment program for the
Fund, including investment research and management with respect
to all securities, investments, cash and cash equivalents of the
Fund. The Advisor determines what securities and other
investments will be purchased, retained or sold by the Fund, and
does so in accordance with the investment objective and policies
of the Fund as described herein and in the Prospectus. The
Advisor places all securities orders for the Fund, determining
with which broker, dealer, or issuer to place the orders.
The Advisor also provides, at its own expense, certain Executive
Officers to the Trust.
The Advisor must adhere to the brokerage policies of the Fund in
placing all orders, the substance of which policies are that the
Advisor attempts to obtain the best execution for all securities
brokerage transactions.
Under the Advisory Agreement, the Advisor is not responsible for
any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the performance of the Agreement,
except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith or gross negligence
on the part of the Advisor in the performance of its duties or
from the reckless disregard of its duties and obligations under
the Agreement.
ADMINISTRATOR
MGF Service Corp. (the "Administrator") maintains the records of
each shareholder's account, answers shareholders' inquiries
concerning their accounts, processes purchases and redemptions of
the Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. The
Administrator receives for its services as transfer agent a fee
payable monthly at an annual rate of $17 per account, provided,
however, that the minimum fee is $1,000 per month for each class
of shares. In addition, the Fund pays out-of-pocket expenses,
including but not limited to, postage, envelopes, checks, drafts,
forms, reports, record storage and communication lines.
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The Administrator also provides accounting and pricing services
to the Fund. The Administrator receives $3,000 per month from
the Fund for calculating daily net asset value per share and
maintaining such books and records as are necessary to enable the
Administrator to perform its duties.
In addition, the Administrator has been retained to provide
administrative services to the Fund. In this capacity, the
Administrator supplies non-investment related statistical and
research data, internal regulatory compliance services and
executive and administrative services. The Administrator
supervises the preparation of tax returns, reports to
shareholders of the Fund, reports to and filings with the
Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees.
For the performance of these administrative services, the Fund
pays the Administrator a fee at the annual rate of .15% of the
average value of its daily net assets up to $50,000,000, .125% of
such assets from $50,000,000 to $100,000,000 and .1% of such
assets in excess of $100,000,000.
Prior to June 1, 1996 the administrator to the Fund was The
Nottingham Company, Rocky Mount, North Carolina. For the fiscal
year ended February 29, 1996, The Nottingham Company received
from the Fund a fee of $36,000.
DISTRIBUTOR
Midwest Group Financial Services, Inc. (the "Distributor") is the
principal underwriter of the Fund and, as such, the exclusive
agent for distribution of shares of the Fund. The Distributor is
obligated to sell the shares on a best efforts basis only against
purchase orders for the shares. Shares of the Fund are offered
to the public on a continuous basis.
The Distributor currently allows concessions to dealers who sell
Investor Shares of the Fund. The Distributor retains the entire
sales charge on all direct investments in Investor Shares and on
all investments in accounts with no designated dealer of record.
Prior to June 1, 1996, Capital Investment Group, Inc. served as
distributor for the Fund. For the fiscal year ended February 29,
1996, Capital Investment Group, Inc. retained $5,198 in
underwriting commissions.
The Fund may compensate dealers, including the Distributor and
its affiliates, based on the average balance of all accounts in
Investor Shares for which the dealer is designated as the party
responsible for the account. See "Distribution Plan Under Rule
12b-1" below.
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OTHER SERVICES
AUDITORS. The firm of KPMG Peat Marwick LLP, 201 East Fifth
Street, Cincinnati, Ohio 45202, has been retained by the Board of
Trustees to perform an independent audit of the books and records
of the Trust, to prepare the Fund's federal and state tax returns
and to consult with the Trust as to matters of accounting and
federal and state income taxation.
CUSTODIAN. The Custodian of the Fund's assets is The Fifth Third
Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263. The
Custodian holds all cash and securities of the Fund (either in
its possession or in its favor through "book entry systems"
authorized by the Trustees in accordance with the 1940 Act),
collects all income and effects all securities transactions on
behalf of the Fund. For its services as Custodian, the Custodian
receives an annual fee from the Fund based on the average net
assets of the Fund held by the Custodian.
BROKERAGE
It is the Fund's practice to seek to obtain the best overall
terms available in executing Fund transactions and selecting
brokers or dealers. Subject to the general supervision of the
Board of Trustees, the Advisor is responsible for, makes
decisions with respect to, and places orders for all purchases
and sales of portfolio securities for the Fund.
In assessing the best overall terms available for any
transaction, the Advisor shall consider factors it deems
relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In addition, the Advisor may cause the Fund to
pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by
another broker-dealer for effecting the same transaction,
provided the Advisor determines in good faith that such
commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer,
viewed in terms of either the particular transaction or the
overall responsibilities of the Advisor to the Fund. Such
brokerage and research services may consist of reports and
statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative
earnings and yields, or broad overviews of the economy and the
stock, bond and government securities markets.
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Supplementary research information so received is in addition to,
and not in lieu of, services required to be performed by the
Advisor and does not reduce the advisory fees payable by the
Fund. The Trustees will periodically review any commissions paid
by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in
relation to the benefits received by the Fund. It is possible
that certain of the supplementary research or other services
received will primarily benefit one or more other accounts for
which investment discretion is exercised by the Advisor.
Conversely, the Fund may be the primary beneficiary of the
research or other services received as a result of securities
transactions effected for such other accounts.
The Advisor may also utilize a brokerage firm affiliated with the
Trust or the Advisor if it believes it can obtain the best
execution from such firm. The Fund will not execute portfolio
transactions through, acquire securities issued by, make savings
deposits in or enter into repurchase agreements with the Advisor
or an affiliated person of the Advisor (as such term is defined
in the 1940 Act) acting as principal, except to the extent
permitted by the Securities and Exchange Commission ("SEC"). In
addition, the Fund will not purchase securities during the
existence of any underwriting or selling group relating thereto
of which the Advisor or an affiliated person of the Advisor, is a
member, except to the extent permitted by the SEC. Under certain
circumstances, the Fund may be at a disadvantage because of these
limitations in comparison with other investment companies that
have similar investment objectives but are not subject to such
limitations.
The Fund purchases money market instruments from dealers,
underwriters and issuers. The Fund does not expect to incur any
brokerage commissions on such purchases because money market
instruments are generally traded on a net basis by a dealer
acting as principal for its own account without a stated
commission. The price of the security, however, usually includes
a profit to the dealer. Securities purchased in underwritten
offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's
concession or discount. When securities are purchased directly
from or sold directly to an issuer, no commissions or discounts
are paid.
Transactions on U.S. stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary
among different brokers. Transactions in the over-the-counter
market are generally on a net basis (i.e. without commission)
through dealers, or otherwise involve transactions directly with
the issuer of an instrument.
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The Fund's fixed-income portfolio transactions will normally be
principal transactions executed in over-the-counter markets and
will be executed on a "net" basis, which may include a dealer
markup. With respect to securities traded only in the over-the-
counter market, orders will be executed on a principal basis with
primary market makers in such securities except where better
prices or executions may be obtained on an agency basis or by
dealing with other than a primary market maker.
The Fund may participate, if and when practicable, in bidding for
the purchase of Fund securities directly from an issuer in order
to take advantage of the lower purchase price available to
members of a bidding group. The Fund will engage in this
practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
Investment decisions for the Fund will be made independently from
those for any other accounts advised or managed by the Advisor.
Such other accounts may also invest in the same securities as the
Fund. To the extent permitted by law, the Advisor may aggregate
the securities to be sold or purchased for the Fund with those to
be sold or purchased for other accounts in executing
transactions. When a purchase or sale of the same security is
made at substantially the same time on behalf of the Fund and
other accounts, the transaction will be averaged as to price and
available investments allocated as to amount, in the manner which
the Advisor believes to be equitable to the Fund and such other
accounts. In some instances, this investment procedure may
adversely affect the price paid or received by the Fund or the
size of the position obtained or sold by the Fund.
For the fiscal year ended February 29, 1996 and for the fiscal
period ended February 28, 1995, the total amount of brokerage
commissions paid by the Fund were $9,704 and $306, respectively.
DISTRIBUTION PLAN UNDER RULE 12b-1
The Trust has adopted a Plan of Distribution for Investor Shares
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). The Plan
permits Investor Shares of the Fund to pay for expenses incurred
in the distribution and promotion of such shares.
Under the Plan, the Fund may expend in any fiscal year up to .50%
of the Investor Shares' average daily net assets to finance any
activity which is primarily intended to result in the sale of
Investor Shares and the servicing of shareholder accounts,
provided the Board of Trustees has approved the category of
expenses for which payment is being made. Expenditures under the
Plan as service fees to any person who sells Investor Shares may
not exceed an annual rate of .25% of the average daily net assets
of such shares.
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Potential benefits to the Fund from the Plan include improved
shareholder servicing, savings in transfer agency costs, benefits
to the investment process from growth and stability of assets and
maintenance of a financially healthy management organization.
Subject to its practice of seeking to obtain best execution, the
Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plan.
During the fiscal period ended February 29, 1996, Investor Shares
incurred $3,791 in distribution costs under the Plan for payments
to broker-dealers and others for the sale or retention of assets.
Robert B. Thompson, as the Executive Manager and a
controlling shareholder of the Advisor, may be deemed to have a
financial interest in the operation of the Plan and the
Implementation Agreements.
The Plan, the Underwriting Agreement with the Distributor and the
form of Dealer Agreement with broker-dealers have all been
approved by the Board of Trustees of the Trust, including a
majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or
indirect financial interest in the Plan or any related
agreements, by vote cast in person or at a meeting duly called
for the purpose of voting on the Plan and such Agreements.
Continuation of the Plan, the Underwriting Agreement and the form
of Dealer Agreement must be approved annually by the Board of
Trustees in the same manner as specified above.
Each year the Trustees must determine that continuation of the
Plan is in the best interests of shareholders of the Fund and
there is a reasonable likelihood that the Plan will benefit the
Fund. The Board of Trustees has made such a determination for
the current year of operations under the Plan. The Plan, the
Underwriting Agreement and the Dealer Agreements may be
terminated at any time without penalty by a majority of those
trustees who are not "interested persons" or by a majority of the
outstanding Investor Shares. Any amendment materially increasing
the maximum percentage payable under the Plan must likewise be
approved by a majority of the outstanding Investor Shares as well
as a majority of the Trustees who are not "interested persons"
and have no direct or indirect financial interest in the Plans
(the "Independent Trustees"). In order for the Plan to remain
effective, the selection and nomination of those Trustees who are
not interested persons of the Trust must be effected by the
Independent Trustees during such period. All amounts spent by
the Fund pursuant to the Plan must be reported quarterly in a
written report to the Trustees for their review.
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SPECIAL SHAREHOLDER SERVICES
As noted in the Prospectus, the Fund offers the following
shareholder services:
REGULAR ACCOUNT. The regular account allows for voluntary
investments to be made at any time. Available to individuals,
custodians, corporations, trusts, estates, corporate retirement
plans and others, investors are free to make additions and
withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a
shareholder account is opened in accordance with the investor's
registration instructions. Each time there is a transaction in a
shareholder account, such as an additional investment or the
reinvestment of a dividend or distribution, the shareholder will
receive a confirmation statement showing the current transaction
and all prior transactions in the shareholder account during the
calendar year to date.
AUTOMATIC INVESTMENT PLAN. The automatic investment plan enables
investors to make regular monthly or bimonthly investments in
shares through automatic charges to their checking account. With
shareholder authorization and bank approval, the Administrator
will automatically charge the checking account for the amount
specified ($50 minimum) which will be automatically invested in
shares at the public offering price on or about the fifteenth day
or the last business day of the month. The shareholder may
change the amount of the investment or discontinue the plan at
any time by writing to the Administrator.
PURCHASES IN KIND. The Fund may accept securities in lieu of
cash in payment for the purchase of shares of the Fund. The
acceptance of such securities is at the sole discretion of the
Advisor based upon the suitability of the securities accepted for
inclusion as a long term investment of the Fund, the
marketability of such securities, and other factors which the
Advisor may deem appropriate. If accepted, the securities will
be valued using the same criteria and methods as described in
"How Shares are Valued" in the Prospectus. Transactions
involving the issuance of shares in the Fund for securities in
lieu of cash will be limited to acquisitions of securities
(except for municipal debt securities issued by state political
subdivisions or their agencies or instrumentalities) which: (a)
meet the investment objective and policies of the Fund; (b) are
acquired for investment and not for resale; (c) are liquid
securities which are not restricted as to transfer either by law
or liquidity of market; and (d) have a value which is readily
ascertainable (and not established only by evaluation procedures)
as evidenced by a listing on the American Stock Exchange, the New
York Stock Exchange or NASDAQ.
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REDEMPTION IN KIND. The Fund does not intend, under normal
circumstances, to redeem its securities by payment in kind. It
is possible, however, that conditions may arise in the future
which would, in the opinion of the Trustees, make it undesirable
for the Fund to pay for all redemptions in cash. In such case,
the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities
delivered in payment of redemptions would be valued at the same
value assigned to them in computing the net asset value per
share. Shareholders receiving such securities would incur
brokerage costs when the securities are sold. An irrevocable
election has been filed under Rule 18f-1 of the 1940 Act, wherein
the Fund is committed to pay redemptions in cash, rather than in
kind, to any shareholder of record of the Fund who redeems during
any ninety day period, the lesser of (a) $250,000 or (b) one
percent (1%) of the Fund's net assets at the beginning of such
period.
TRANSFER OF REGISTRATION. To transfer shares to another owner,
send a written request to the Fund's Administrator at the address
shown herein. Your request should include the following: (1)
the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s)
on the account registration; (3) the new account registration,
address, social security or taxpayer identification number and
how dividends and capital gains are to be distributed; (4)
signature guarantees (see the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which
are required for transfer by corporations, administrators,
executors, trustees, guardians, etc. If you have any questions
about transferring shares, call or write the Administrator.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
PURCHASES. Shares of the Fund are offered and sold on a
continuous basis and may be purchased through authorized dealers
or directly by contacting the Distributor or the Administrator.
Selling dealers have the responsibility of transmitting orders
promptly to the Fund's Administrator. The public offering price
of Investor Shares equals net asset value plus a sales charge.
Institutional Shares are sold at net asset value. The
Distributor receives the sales charge on Investor Shares as
Distributor and may reallow it in the form of dealer discounts
and brokerage commissions. The current schedule of sales charges
and related dealer discounts and brokerage commissions for
Investor Shares is set forth in the Prospectus. See "How to
Purchase Shares" in the Prospectus.
REDEMPTIONS. Under the 1940 Act, the Fund may suspend the right
of redemption or postpone the date of payment for shares during
any period when (a) trading on the New York Stock Exchange is
restricted by applicable rules and regulations of the SEC; (b)
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the Exchange is closed for other than customary weekend and
holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC.
The Fund may also suspend or postpone the recordation of the
transfer of shares upon the occurrence of any of the foregoing
conditions.
In addition to the situations described in the Prospectus under
"How to Redeem Shares," the Fund may redeem shares involuntarily
to reimburse the Fund for any loss sustained by reason of the
failure of an investor to make full payment for shares purchased
by the investor or to collect any charge relating to a
transaction effected for the benefit of an investor which is
applicable to Fund shares as provided in the Prospectus from time
to time.
HOW SHARE PRICE IS DETERMINED
Under the 1940 Act, the Trustees are responsible for determining
in good faith the fair value of the securities and other assets
of the Fund and they have adopted procedures to do so as follows:
The public offering price (net asset value plus applicable sales
charge) of Investor Shares and the net asset value of
Institutional Shares of the Fund is determined as of 4:00 p.m.,
Eastern time, Monday through Friday, except on business holidays
when the New York Stock Exchange is closed. The New York Stock
Exchange recognizes the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Fourth of July, Labor
Day, Thanksgiving Day and Christmas Day. Any other holiday
recognized by the New York Stock Exchange will be considered a
business holiday on which the Fund's share price will not be
determined.
The net asset value per share of each class of the Fund is
calculated separately by adding the value of the securities and
other assets belonging to the Fund and attributable to that
class, subtracting the liabilities charged to the Fund and to
that class and dividing the result by the number of outstanding
shares of that class. Assets belonging to the Fund consist of
the consideration received upon the issuance of shares of the
Fund together with all net investment income, realized gains/
losses and proceeds derived from the investment thereof,
including any proceeds from the sale of such investments, any
funds or payments derived from any reinvestment of such proceeds,
and a portion of any general assets of the Trust not belonging to
a particular Fund. Income, realized and unrealized capital gains
and losses, and any expenses of the Fund not allocable to a
particular class of shares will be allocated to each class based
on the net assets of that class in relation to the net assets of
the Fund. Assets belonging to the Fund are charged with the
direct liabilities of the Fund and with a share of the general
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liabilities of the Trust, which are normally allocated in
proportion to the number of or the relative net assets of all
series in the Trust at the time of allocation or in accordance
with other allocation methods approved by the Board of Trustees.
Certain expenses attributable to a particular class of shares
(such as distribution fees attributable to Investor Shares) will
be charged to that class. Certain other expenses attributable to
a particular class of shares (such as registration fees,
professional fees and certain printing and postage expenses) may
be charged to that class if such expenses are actually incurred
in a different amount by that class or if the class receives
services of a different kind or to a different degree than
another class and the Board of Trustees approves such allocation.
Subject to the provisions of the Declaration of Trust,
determinations by the Board of Trustees as to the direct and
allocable liabilities and the allocable portion of any general
assets, with respect to the Fund and its classes are conclusive.
ADDITIONAL TAX INFORMATION
The following summarizes certain additional tax considerations
generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a
detailed explanation of the tax treatment of the Fund or its
shareholders, and the discussion here and in the Prospectus is
not intended as a substitute for careful tax planning and is
based on tax laws and regulations that are in effect on the date
hereof; such laws and regulations may be changed by legislative,
judicial or administrative action. Investors are advised to
consult their tax advisors with specific reference to their own
tax situations.
Each series of the Trust, including the Fund, will be treated as
a separate entity under the Code and intends to qualify or remain
qualified as a regulated investment company. In order to so
qualify, each series must elect to be a regulated investment
company or have made such an election for a previous year and
must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to
the source of its income for a taxable year. At least 90% of the
gross income of the Fund must be derived from dividends,
interest, payments with respect to securities loans, gains from
the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the Fund's
business of investing in such stock, securities or currencies.
Any income derived by the Fund from a partnership or trust is
derived with respect to the Fund's business of investing in such
stock, securities or currencies only to the extent that such
income is attributable to items of income that would have been
qualifying income if realized by the Fund in the same manner as
by the partnership or trust.
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Another requirement for qualification as a regulated investment
company under the Code is that less than 30% of the Fund's gross
income for a taxable year must be derived from gains realized on
the sale or other disposition of the following investments held
for less than three months: (1) stock and securities (as defined
in Section 2(a)(36) of the 1940 Act); (2) options, futures and
forward contracts other than those on foreign currencies; or (3)
foreign currencies (or options, futures or forward contracts on
foreign currencies) that are not directly related to the Fund's
principal business of investing in stocks or securities (or
options and futures with respect to stocks or securities).
Interest (including original issue discount and, with respect to
certain debt securities, accrued market discount) received by the
Fund upon maturity or disposition of a security held for less
than three months will not be treated as gross income derived
from the sale or other disposition of such security within the
meaning of this requirement. However, any other income which is
attributable to realized market appreciation will be treated as
gross income from the sale or other disposition of securities for
this purpose.
An investment company may not qualify as a regulated investment
company for any taxable year unless it satisfies certain
requirements with respect to the diversification of its
investments at the close of each quarter of the taxable year. In
general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities,
securities of other regulated investment companies and other
securities which, with respect to any one issuer, do not
represent more that 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of
such issuer. In addition, not more than 25% of the value of the
investment company's total assets may be invested in the
securities (other than government securities or the securities of
other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for
continued qualification as a regulated investment company.
The Fund will designate any distribution of long term capital
gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the Fund's taxable
year. Shareholders should note that, upon the sale or exchange
of shares, if the shareholder has not held such shares for at
least six months, any loss on the sale or exchange of those
shares will be treated as a long term capital loss to the extent
of the capital gain dividends with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and
capital gain net income (excess of capital gains over capital
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losses). The Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any
capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment
companies, all of its taxable income will be subject to federal
income tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt
securities) would be taxable as ordinary income to shareholders
to the extent of the Fund's current and accumulated earnings and
profits, and would be eligible for the dividends received
deduction for corporations.
The Fund will be required in certain cases to withhold and remit
to the U.S. Treasury 31% of taxable dividends or 31% of gross
proceeds realized upon sale paid to shareholders who have failed
to provide a correct tax identification number in the manner
required, or who are subject to withholding by the Internal
Revenue Service for failure to properly include on their tax
return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup
withholding when required to do so or that they are "exempt
recipients."
Depending upon the extent of the Fund's activities in states and
localities in which its offices are maintained, in which its
agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, the Fund may be
subject to the tax laws of such states or localities. In
addition, in those states and localities that have income tax
laws, the treatment of the Fund and its shareholders under such
laws may differ from their treatment under federal income tax
laws.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under
Massachusetts law on August 12, 1992. The Trust's Declaration of
Trust authorizes the Board of Trustees to divide shares into
series, each series relating to a separate portfolio of
investments. The Declaration of Trust currently provides for the
shares of five series: the Amelia Earhart: Eagle Equity Fund
managed by Amelia Earhart Capital Management, Inc. of Southfield
Michigan; the Regional Opportunity Fund: Ohio Indiana Kentucky
managed by CityFund Advisory, Inc. of Cincinnati, Ohio; the
Legacy Equity Fund managed by Legacy Advisors, Inc. of Dallas,
Texas; the Mississippi Opportunity Fund managed by Vector Money
Management, Inc. of Jackson, Mississippi and the Fund. The Board
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of Trustees has authorized separate classes of shares for the
Amelia Earhart: Eagle Equity Fund, the Regional Opportunity Fund:
Ohio Indiana Kentucky, the Mississippi Opportunity Fund and the
Fund.
In the event of a liquidation or dissolution of the Trust or an
individual series, such as the Fund, shareholders of a particular
series would be entitled to receive the assets available for
distribution belonging to such series. Shareholders of a series
are entitled to participate equally in the net distributable
assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each
shareholder. If any assets, income, earnings, proceeds, funds or
payments are not readily identifiable as belonging to any
particular series, the Trustees shall allocate them among any one
or more series as they, in their sole discretion, deem fair and
equitable.
Shares of the Fund, when issued, are fully paid and non-
assessable. Shareholders are entitled to one vote for each full
share held and a fractional vote for each fractional share held.
Shareholders of all series in the Trust, including the Fund, will
vote together and not separately, except as otherwise required by
law or when the Board of Trustees determines that the matter to
be voted upon affects only the interests of the shareholders of a
particular series or class. Rule 18f-2 under the 1940 Act
provides that any matter required to be submitted to the holders
of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the
outstanding shares of each series or class affected by the
matter. A series or class is affected by a matter unless it is
clear that the interests of each series in the matter are
substantially identical or that the matter does not affect any
interest of the series. Under Rule 18f-2 of the 1940 Act, the
approval of an investment advisory agreement, a material change
to a Rule 12b-1 Plan or any change in a fundamental investment
policy would be effectively acted upon with respect to a series
only if approved by a majority of the outstanding shares of such
series. However, the Rule also provides that the ratification of
the appointment of independent accountants, the approval of
principal underwriting contracts and the election of Trustees
may be effectively acted upon by shareholders of the Trust voting
together, without regard to a particular series.
The Declaration of Trust provides that the Trustees of the Trust
will not be liable in any event in connection with the affairs of
the Trust, except as such liability may arise from his or her own
bad faith, willful misfeasance, gross negligence or reckless
disregard of duties. It also provides that all third parties
shall look solely to the Trust property for satisfaction of
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claims arising in connection with the affairs of the Trust. With
the exceptions stated, the Declaration of Trust provides that a
Trustee or officer is entitled to be indemnified against all
liability in connection with the affairs of the Trust.
Prior to June 1, 1996 the Trust was named The Nottingham
Investment Trust.
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, the Fund may, from time to time,
advertise certain total return and yield information. Average
annual total return and yield are computed separately for
Investor and Institutional Shares of the Fund. The yield of
Institutional Shares is expected to be higher than the yield of
Investor Shares due to the distribution fees imposed on Investor
Shares. The average annual total return of the Fund for a period
is computed by subtracting the net asset value per share at the
beginning of the period from the net asset value per share at the
end of the period (after adjusting for the reinvestment of any
income dividends and capital gain distributions), and dividing
the result by the net asset value per share at the beginning of
the period. In particular, the average annual total return of
the Fund ("T") is computed by using the redeemable value at the
end of a specified period of time ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of time ("n")
according to the formula P(l+T)n=ERV. The calculation of average
annual total return assumes the reinvestment of all dividends and
distributions and the deduction of the current maximum sales load
from the initial $1,000 payment. The average annual total
returns of Investor Shares for the one year period ended February
29, 1996 and the period since inception (January 3, 1995) to
February 29, 1996 are 14.40% and 17.63%, respectively. The
average annual total return of Institutional Shares for the
period since inception (May 22, 1995) to February 29, 1996 is
23.44%
In addition, the Fund may advertise other total return
performance data ("Nonstandardized Return"). Nonstandardized
Return shows as a percentage rate of return encompassing all
elements of return (i.e., income and capital appreciation or
depreciation); it assumes reinvestment of all dividends and
capital gain distributions. This computation does not include
the effect of the applicable sales load which, if included, would
reduce total return. Nonstandardized Return may consist of a
cumulative percentage of return, actual year-by-year rates or any
combination thereof. The average annual Nonstandardized Returns
of Investor Shares (computed without the applicable sales load)
for the one year period ended February 29, 1996 and for the
period since inception (January 3, 1995) to February 29, 1996 are
18.59% and 21.32%, respectively. A nonstandardized quotation of
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total return will always be accompanied by the Fund's average
annual total return as described above.
From time to time, the Fund may advertise its yield. A yield
quotation is based on a 30-day (or one month) period and is
computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Solely for the purpose of computing yield, dividend income is
recognized by accruing 1/360 of the stated dividend rate of the
security each day that the Fund owns the security. Generally,
interest earned (for the purpose of "a" above) on debt
obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation
(including actual accrued interest) at the close of business on
the last business day prior to the start of the 30-day (or one
month) period for which yield is being calculated, or, with
respect to obligations purchased during the month, the purchase
price (plus actual accrued interest).
The Fund's performance may be compared in advertisements, sales
literature, shareholder reports, and other communications to the
performance of other mutual funds having similar objectives or to
standardized indices or other measures of investment performance.
In particular, the Fund may compare its performance to the S&P
500 Index, which is generally considered to be representative of
the performance of unmanaged common stocks that are publicly
traded in the United States securities markets. Comparative
performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service, such as Lipper
Analytical Services, Inc. or Morningstar, Inc. or by one or more
newspapers, newsletters or financial periodicals. The Fund may
also occasionally cite statistics to reflect its volatility and
risk. The Fund may also compare its performance to published
reports of the performance of unmanaged portfolios of companies
located in North and South Carolina. The performance of such
unmanaged portfolios generally does not reflect the effects of
dividends or dividend reinvestment. Of course, there can be no
assurance that the Fund will experience the same results.
Performance comparisons may be useful to investors who wish to
compare the Fund's past performance to that of other mutual funds
and investment products. Of course, past performance is not a
guarantee of future results.
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The Fund's performance fluctuates on a daily basis largely
because net earnings and net asset value per share fluctuate
daily. Both net earnings and net asset value per share are
factors in the computation of total return as described above.
As indicated, from time to time, the Fund may advertise its
performance compared to similar funds or portfolios using certain
indices, reporting services, and financial publications. These
may include the following:
Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total
return. Total return assumes the reinvestment of all
capital gains distributions and income dividends and takes
into account any change in net asset value over a specific
period of time.
Morningstar, Inc., an independent rating service, is the
publisher of the bi-weekly Mutual Fund Values. Mutual Fund
Values rates more than 1,000 NASDAQ-listed mutual funds of
all types, according to their risk-adjusted returns. The
maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's
Prospectus to obtain a more complete view of the Fund's
performance before investing. Of course, when comparing the
Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered
in assessing the significance of such comparisons. When
comparing funds using reporting services, or total return,
investors should take into consideration any relevant differences
in funds such as permitted portfolio compositions and methods
used to value portfolio securities and compute offering price.
Advertisements and other sales literature for the Fund may quote
total returns that are calculated on nonstandardized base
periods. The total returns represent the historic change in the
value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and
other communications information, charts, and illustrations
relating to inflation and the effects of inflation on the dollar,
including the purchasing power of the dollar at various rates of
inflation. The Fund may also disclose from time to time
information about its portfolio allocation and holdings at a
particular date (including ratings of securities assigned by
independent rating services such as S&P and Moody's). The Fund
may also depict the historical performance of the securities in
which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with
alternative investments, performance indices of those
investments, or economic indicators. The Fund may also include
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<PAGE>
in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to
the appropriateness of types of securities and/or mutual funds
that may be employed to meet specific financial goals, such as
saving for retirement, children's education, or other future
needs.
ADDITIONAL INFORMATION ON NORTH AND SOUTH CAROLINA
The economies of North and South Carolina embrace the following
sectors: financial (39%), utilities (17%), services (17%), basic
industries (11%), consumer goods (nondurables)(7%), capital goods
(5%), consumer goods (durables)(2%), health care (1%) and
transportation (1%). (Source: Standard & Poor's.)
From 1982-1991, the combined Gross State Product (GSA) for North
and South Carolina exceeded the Gross National Product (GNP) by
50% (3.6% versus 2.4% average annual growth). This information,
based on billions of 1987 dollars, may be provided by graph in
advertisements and sales literature prepared for the Fund.
(Source: Federal Reserve Bank of Richmond.)
The Advisor believes North and South Carolina have an economic
atmosphere anchored by: low taxes; progressive governments that
support business growth and opportunity; ready availability of
capital, with banking assets in the two states exceeding $145
billion; a highly skilled workforce, combined with right-to-work
status; major transportation and distribution hubs; nationally
recognized colleges and universities, plus statewide community
college networks; and citizens who enjoy an outstanding quality
of life, based on traditional values, a strong work ethic, and a
commitment to education and the arts.
In the past, North and South Carolina have ranked first and
second in the nation in corporate headquarter relocations:
1991-1993 Corporate Relocations by State
Overall Facilities per
Rank State 1 mil. Population
1 North Carolina 161.6
2 South Carolina 103.9
3 Ohio 119.7
4 Texas 60.7
5 Indiana 74.2
(Source: Site Selection Magazine)
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APPENDIX A
DESCRIPTION OF RATINGS
Under normal market conditions, at least 90% of the Fund's net
assets will be invested in equities. As a temporary defensive
position, however, the Fund may invest up to 100% of its assets
in investment grade bonds, U.S. Government Securities, repurchase
agreements or money market instruments ("Investment-Grade Debt
Securities"). When the Fund invests in Investment-Grade Debt
Securities as a temporary defensive measure, it is not pursuing
its investment objective. Under normal circumstances, however,
the Fund may invest in money market or repurchase agreement
instruments as described in the Prospectus.
The various ratings used by the NRSROs are described below. A
rating by an NRSRO represents the organization's opinion as to
the credit quality of the security being rated. However, the
ratings are general and are not absolute standards of quality or
guarantees as to the creditworthiness of an issuer.
Consequently, the Advisor believes that the quality of fixed-
income securities in which the Fund may invest should be
continuously reviewed and that individual analysts give different
weightings to the various factors involved in credit analysis. A
rating is not a recommendation to purchase, sell or hold a
security because it does not take into account market value or
suitability for a particular investor. When a security has
received a rating from more than one NRSRO, each rating is
evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the NRSROs
from other sources that they consider reliable. Ratings may be
changed, suspended or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
Description of Moody's Investors Service, Inc.'s Ratings:
The following summarizes the four highest ratings used by Moody's
Investors Service, Inc. ("Moody's") for bonds which are deemed by
the Advisor to be Investment-Grade Debt Securities.
Aaa: Bonds rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
- 27 -
<PAGE>
Aa: Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long term risks appear somewhat larger than in Aaa
securities.
A: Bonds rated A possess many favorable investment
attributes and are to be considered upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present that suggest
a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Moody's applies numerical modifiers (1,2 and 3) with respect to
bonds rated Aa, A and Baa. The modifier 1 indicates that the
bond being rated ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the bond ranks in the lower end of its
generic rating category.
Bonds which are rated Ba, B, Caa, Ca or C by Moody's are not
considered Investment-Grade Debt Securities by the Advisor.
Bonds rated Ba are judged to have speculative elements because
their future cannot be considered as well assured. Uncertainty
of position characterizes bonds in this class, because the
protection of interest and principal payments often may be very
moderate and not well safeguarded. Bonds which are rated B
generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be
small. Bonds which are rated Caa are of poor standing. Such
securities may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which are
rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
- 28 -
<PAGE>
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1 (or related
supporting institutions) are considered to have superior capacity
for repayment of short-term promissory obligations. Issuers
rated Prime-2 (or related supporting institutions) are considered
to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while
still appropriated may be more affected by external conditions.
Ample alternate liquidity is maintained.
The following summarizes the highest rating used by Moody's for
short-term notes and variable rate demand obligations:
MIG-1; VMIG-1 - Obligations bearing these designations are
of the best quality, enjoying strong protection by
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.
Description of Standard & Poor's Ratings Group's Ratings:
The following summarizes the four highest ratings used by
Standard & Poor's Ratings Group ("S&P") for bonds which are
deemed by the Advisor to be Investment-Grade Debt Securities.
AAA: This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay
principal and interest.
AA: Bonds rated AA also qualify as high quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
To provide more detailed indications of credit quality, the AA, A
and BBB ratings may be modified by the addition of a plus or
minus sign to show relative standing within these major rating
categories.
- 29 -
<PAGE>
Bonds rated BB, B, CCC, CC and C are not considered by the
Advisor to be Investment-Grade Debt Securities and are regarded,
on balance, as predominately speculative with respect to the
issuer's capacity to pay interest and principal in accordance
with the terms of the obligation. BB indicates the lowest degree
of speculation and C the highest degree of speculation. While
such bonds may have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of
safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety characteristics are
denoted A-1+. Capacity for timely payment on commercial paper
rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to
municipal notes and indicates very strong or strong capacity to
pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are give a plus (+)
designation.
Description of Fitch Investors Service Inc.'s Ratings:
The following summarizes the four highest ratings used by Fitch
Investors Service, Inc. ("Fitch") for bonds which are deemed by
the Advisor to be Investment-Grade Debt Securities.
AAA: Bonds are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to
be affected by reasonably foreseeable events.
AA: Bonds are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong as
bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated
F-1+.
A: Bonds are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB: Bonds are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
- 30 -
<PAGE>
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A
and BBB ratings may be modified by the addition of a plus or
minus sign to show relative standing within a rating category.
Bonds rated BB, B and CCC by Fitch are not considered Investment-
Grade Debt Securities and are regarded, on balance, as
predominately speculative with respect to the issuer's ability to
pay interest and make principal payments in accordance with the
terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch
for short-term notes, municipal notes, variable rate demand
instruments and commercial paper.
F-1+ - Instruments assigned this rating are regarded as
having the strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues
rated F-1+.
F-2 - Instruments assigned this rating have satisfactory
degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ and F-1
ratings.
Description of Duff & Phelps' Credit Rating Co.'s Ratings:
The following summarizes the four highest ratings used by Duff &
Phelps Credit Rating Co. ("D&P") for bonds which are deemed by
the Advisor to be Investment-Grade Debt Securities.
AAA: This is the highest rating credit quality. The risk
factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA: Bonds rated AA are considered to be of high credit
quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
A: Bonds rated A have average but adequate protection
factors. However risk factors are more variable and greater in
periods of economic stress.
- 31 -
<PAGE>
BBB: Bonds rated BBB have below average protection factors,
but are still considered sufficient for prudent investment.
There is considerable variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered Investment-
Grade Debt Securities and are regarded, on balance, as
predominately speculative with respect to the issuer's ability to
pay interest and make principal payments in accordance with the
terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff 1 is the highest rating assigned by D&P for
short-term debt, including commercial paper. D&P employs three
designations, Duff 1+, Duff 1 and Duff 1- within the highest
rating category. Duff 1+ indicates highest certainty of timely
payment. Short-term liquidity, including internal operating
factors and/or access to alternative sources of funds, is judged
to be outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. Duff 1 indicates very high
certainty of timely payment. Liquidity factors are excellent and
supported by good fundamental protection factors. Risk factors
are considered to be minor. Duff 1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by
good fundamental protection factors. Risk factors are very
small.
FINANCIAL STATEMENTS AND REPORTS
The books of the Fund will be audited at least once each year by
independent public accountants. Shareholders will receive annual
audited and semiannual (unaudited) reports when published, and
will receive written confirmation of all confirmable transactions
in their account. A copy of the Annual Report will accompany the
Statement of Additional Information whenever the Statement of
Additional Information is requested by a shareholder or
prospective investor. The Financial Statements of the Fund as of
February 29, 1996, together with the report of the independent
accountants thereon, are included on the following pages.
- 32 -
<PAGE>
- -
April 30, 1996
Dear CarolinasFund Shareholder:
Your Fund ended the fiscal year on February 29, 1996 with an annualized total
return of 18.59% in Investor Class Shares. Institutional Shares, first issued
May 22, 1995, had a total investment return of 17.68% through the end of the
fiscal year.
Based on the strength and diversity of the Carolinas' economies, as reflected in
the Fund's portfolio, we remain optimistic that it will continue to reward our
shareholders.
The CarolinasFund is a modified index fund containing the 50 largest market
capitalization companies in North and South Carolina. Companies are ranked, or
indexed, quarterly according to market capitalization (share price times number
of shares outstanding). The amount invested in any company depends on its
percentage of the total market capitalization with no company receiving more
than 3% of total dollars available; The 15 biggest companies are capped at 3%.
As a result of this investment strategy, smaller companies are "overweighted",
taking advantage of their historical tendency to outperform large cap stocks.
Thank you for your confidence in The CarolinasFund. I trust it will continue to
be merited.
Bob Thompson
President
<PAGE>
THE CAROLINASFUND
INVESTOR SHARES
Performance Update - $10,000 Investment
For the period from January 3, 1995 (commencement of
operations) to February 29, 1996
[GRAPH APPEARS HERE]
CarolinasFund-
Investor class fund S&P 500
03-Jan-95 9650 9650
28-Feb-95 10174 10244
31-May-95 10429 11212
31-Aug-95 11516 11810
30-Nov-95 11671 12724
29-Feb-96 12066 13461
THIS GRAPH DEPICTS THE PERFORMANCE OF THE CAROLINASFUND INVESTOR SHARES VERSUS
THE S&P 500 INDEX. IT IS IMPORTANT TO NOTE THAT THE CAROLINASFUND IS A
PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDEX IS NOT AVAILABLE FOR
INVESTMENT AND IS UNMANAGED. THE COMPARISON IS SHOWN FOR ILLUSTRATIVE
PURPOSES ONLY.
ANNUALIZED TOTAL RETURN
Commencement One Year ended
of operations 2/29/96
through 2/29/96
Maximum 3.5% Sales Load 17.63% 14.40%
No Sales Load 21.32% 18.59%
(bullet) The graph assumes an initial $10,000 investment at January 3, 1995
($9,650 after maximum sales load of 3.5%). All dividends and
distributions are reinvested.
(bullet) At February 29, 1996, the Investor Shares of the Fund would have
grown to $12,066 - total investment return of 20.66% since
January 3, 1995. Without the deduction of the 3.5% maximum sales
load, the Investor Shares of the Fund would have grown to $12,530 -
total investment return of 25.03% since January 3, 1995. The sales
load may be reduced or eliminated for larger purchases.
(bullet) At February 29, 1996, a similar investment in the S&P 500 Index (after
maximum sales load of 3.5%) would have grown to $13,461 - total
investment return of 34.61% since January 3, 1995.
(bullet) Past performance is not a guarantee of future results. A mutual
fund's share price and investment return will vary with market
conditions, and the principal value of shares, when redeemed,
may be worth more or less than the original cost. Average annual
returns are historical in nature and measure net investment income
and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
<TABLE>
<CAPTION>
Value
Shares (note 1)
<S> <C> <C>
COMMON STOCKS - 96.86%
Beverages - 0.66%
Coca-Cola Bottling Company 400 $12,600
Building Materials - 2.22%
Martin Marietta Materials, Inc. 1,900 42,750
Commercial Services - 3.78%
(a) Quintiles Transnational Corporation 1,100 72,600
Computer Software & Services - 4.15%
(a) Medic Computer Systems, Inc. 500 33,750
(a) Policy Management Systems Corporation 900 46,012
79,762
Electrical Equipment - 4.37%
AVX Corporation 1,700 41,650
(a) Kemet Corporation 1,800 42,300
83,950
Electronics - Semiconductor - 0.31%
(a) Cree Research, Inc. 400 6,050
Entertainment - 1.57%
(a) Speedway Motorsports, Inc. 700 30,275
Financial Services - 0.37%
(a) World Acceptance Corporation 700 7,088
Financial - Banks, Commercial - 20.39%
CCB Financial Corporation 700 35,175
Centura Banks, Inc. 900 31,162
First Citizens BancShares, Inc. 400 23,800
First Union Corporation 1,200 72,600
NationsBank Corporation 1,000 73,750
Southern National Corporation 2,100 58,800
United Carolina Bancshares 1,050 26,775
Wachovia Corporation 1,500 69,750
391,812
Food - Processing - 0.75%
Lance, Inc. 900 14,400
Forest Products & Paper - 2.50%
Bowater, Inc. 1,300 48,100
</TABLE>
(Continued)
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
<TABLE>
<CAPTION>
Value
Shares (note 1)
<S> <C> <C>
COMMON STOCKS (Continued)
Insurance - Life & Health - 5.49%
Jefferson-Pilot Corporation 1,350 $75,094
Liberty Corporation 900 30,487
105,581
Insurance - Property & Casualty - 3.11%
Integon Corporation 700 14,000
United Dominion Industries, Ltd. 1,900 45,838
59,838
Iron & Steel - 2.80%
Nucor Corporation 1,000 53,875
Manufactured Housing - 2.55%
Oakwood Homes Corp 1,100 49,087
Medical - Hospital Mgmt & Service - 0.14%
(a) Coastal Physician Group 200 2,600
Packaging & Containers - 3.04%
Sonoco Products Company 2,135 58,446
Real Estate - 0.42%
(a) Insignia Financial Group, Inc. 400 8,150
Real Estate Investment Trust - 1.56%
Highwoods Properties, Inc. 600 18,000
Summit Properties, Inc. 600 12,075
30,075
Restaurants & Food Service - 0.62%
(a) Ryan's Family Steak Houses, Inc. 1,800 11,925
Retail - General Merchandise - 2.36%
Family Dollar Stores, Inc. 3,300 45,375
Retail - Grocery - 3.89%
Food Lion, Inc. 9,700 53,956
Ruddick Corporation 1,900 20,900
74,856
Retail - Specialty Line - 4.49%
(a) Baby Superstore, Inc. 800 33,700
Lowe's Companies, Inc. 1,700 52,700
86,400
Telecommunications - 1.95%
(a) Vanguard Cellular Systems, Inc. 1,700 37,400
</TABLE>
(Continued)
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
<TABLE>
<CAPTION>
Value
Shares (note 1)
<S> <C> <C>
COMMON STOCKS (Continued)
Telecommunications Equipment - 7.42%
(a) BroadBand Technologies, Inc. 100 $2,450
(a) Glenayre Technologies, Inc. 1,925 84,941
SCANA Corporation 2,000 55,000
142,391
Textiles - 7.31%
(a) Burlington Industries, Inc. 3,000 34,125
(a) Collins & Aikman Corporation 2,800 18,550
(a) Cone Mills Corporation 800 9,100
Guilford Mills, Inc. 500 10,500
Springs Industries, Inc. 400 17,300
Unifi, Inc. 2,100 50,925
140,500
Utilities - Electric - 6.72%
Carolina Power & Light Company 1,800 65,700
Duke Power Company 1,300 63,538
129,238
Utilities - Gas - 1.92%
Piedmont Natural Gas Company, Inc. 1,200 27,000
Public Service Company of North Carolina, Inc. 600 9,900
36,900
Total Common Stocks (Cost $1,660,731) 1,862,024
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
REPURCHASE AGREEMENT (b) - 3.19%
Wachovia Bank $61,370 61,370
5.23%, due March 1, 1996
(Cost $61,370)
Total Value of Investments (Cost $1,722,101) 100.05% 1,923,394
Liabilities In Excess of Other Assets (0.05)% (1,004)
Net Assets 100.00% $1,922,390
</TABLE>
(a) Non-income producing investment.
(b) Joint repurchase agreement entered into February 29, 1996, with a
maturity value of $68,302,116 collateralized by $71,660,000 U.S.
Treasury Bills, due September 19, 1996. The aggregate market value
of the collateral at February 29, 1996 was $69,697,130. The Fund's
pro rata interest in the market value of the collateral at February
29, 1996 was $62,658. The Fund's pro rata interest in the joint
repurchase agreement collateral is taken into possession by the
Fund's custodian upon entering into the repurchase agreement. The
collateral is marked to market daily to ensure its market value is
at least 102 percent of the sales price of the repurchase agreement.
(Continued)
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
(c) Aggregate cost for federal income tax purposes is $1,722,188.
Unrealized appreciation (depreciation) of investments for federal
income tax purposes is as follows:
Unrealized appreciation $249,160
Unrealized depreciation (47,954)
Net unrealized appreciation $201,206
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996
ASSETS
Investments at value (cost $1,722,101) $1,923,394
Receivable for fund shares sold 9,650
Dividends receivable 4,050
Interest receivable 230
Other assets 257
Due from advisor (note 2) 1,821
Deferred organization expenses, net (note 4) 35,680
Total assets 1,975,082
LIABILITIES
Payable for investment purchases 36,411
Accrued professional fees 8,500
Accrued expenses 7,781
Total liabilities 52,692
NET ASSETS $1,922,390
NET ASSETS CONSIST OF:
Paid-in capital $1,720,832
Undistributed net realized gain on investments 265
Net unrealized appreciation on investments 201,293
$1,922,390
INVESTOR CLASS
Net asset value ($1,897,814 (division sign) 152,513
shares outstanding) $12.44
Maximum offering price per share (100 (division sign)
96.5 of $12.44) $12.89
INSTITUTIONAL CLASS
Net asset value and offering price per share ($24,576
(division sign) 1,955 shares outstanding) $12.57
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
STATEMENT OF OPERATIONS
Year ended February 29, 1996
INVESTMENT INCOME
Income
Dividends $22,903
Interest 2,476
Total income 25,379
Expenses
Fund accounting fees (note 2) 29,250
Professional fees 14,107
Investment advisory fees (note 2) 11,386
Custody fees 8,150
Distribution fees (note 3) 5,651
Fund administration fees (note 2) 4,120
Securities pricing fees 3,056
Registration and filing administration fees 1,422
Shareholder recordkeeping fees 1,208
Amortization of deferred organization expenses (note 4) 9,326
Trustee fees and meeting expenses 7,199
Shareholder servicing expenses 4,551
Registration and filing expenses 2,588
Printing expenses 1,614
Other operating expenses 3,493
Total expenses 107,121
Less:
Expense reimbursements (note 2) (69,248)
Investment advisory fees waived (note 2) (11,386)
Distribution fees waived (note 3) (1,860)
Net expenses 24,627
Net investment income 752
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 3,855
Increase in unrealized appreciation on investments 190,112
Net realized and unrealized gain on investments 193,967
Net increase in net assets resulting from operations $194,719
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the
period from
January 3, 1995
(commencement
Year ended of operations) to
February 29, February 28,
1996 1995
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income $752 $987
Net realized gain from investment transactions 3,855 0
Increase in unrealized appreciation on investments 190,112 11,181
Net increase in net assets resulting from operations 194,719 12,168
Distributions to shareholders from
Net investment income - Investor Class (1,987) 0
Net investment income - Institutional Class (1) 0
Net realized gain from investment transactions - Investor Class (3,336) 0
Net realized gain from investment transactions - Institutional Class (5) 0
Decrease in net assets resulting from distributions (5,329) 0
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 1,460,617 260,215
Total increase in net assets 1,650,007 272,383
NET ASSETS
Beginning of period 272,383 0
End of period $1,922,390 $272,383
</TABLE>
(a) A summary of capital share activity follows:
<TABLE>
<CAPTION>
INVESTOR CLASS INSTITUTIONAL CLASS
Year ended For the period from For the period from May 22, 1995
February 29, 1996 January 3, 1995 to (commencement of operations)
February 28, 1995 to February 29, 1996
Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C>
Shares sold 135,220 $1,540,284 25,836 $260,215 1,954 $23,186
Shares issued for reinvestment
of distributions 329 3,765 0 0 1 6
135,549 1,544,049 25,836 260,215 1,955 23,192
Shares redeemed (8,872) (106,624) 0 0 0 0
Net increase 126,677 $1,437,425 25,836 $260,215 1,955 $23,192
</TABLE>
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
INVESTOR INVESTOR INSTITUTIONAL
CLASS CLASS CLASS
For the For the
period from period from
January 3, 1995 May 22, 1995
(commencement (commencement
Year ended of operations) to of operations) to
February 29, February 28, February 29,
1996 1995 1996
<S> <C> <C> <C>
Net asset value, beginning of period $10.54 $10.00 $10.72
Income from investment operations
Net investment income 0.01(a) 0.04 0.02
Net realized and unrealized gain on investments 1.95 0.50 1.88
Total from investment operations 1.96 0.54 1.90
Distributions to shareholders from
Net investment income (0.03) 0.00 (0.02)
Net realized gain from investment transactions (0.03) 0.00 (0.03)
Total distributions (0.06) 0.00 (0.05)
Net asset value, end of period $12.44 $10.54 $12.57
Total return 18.59%(b) 5.40%(d) 17.68%(c)
Ratios/supplemental data
Net assets, end of period $1,897,814 $272,383 $24,576
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 9.45% 37.10%(e) 8.40%(e)
After expense reimbursements and waived fees 2.17% 2.21%(e) 1.69%(e)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (7.21)% (32.27)%(e) (6.07)%(e)
After expense reimbursements and waived fees 0.06% 2.62%(e) 0.64%(e)
Portfolio turnover rate 16.35% 0.00% 16.35%
</TABLE>
(a) Calculation based upon average shares outstanding for the year.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized total return is 23.44%.
(d) Total return does not reflect payment of a sales charge. Annualized
total return was 35.20%
(e) Annualized.
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The CarolinasFund (the "Fund") is a non-diversified series of shares of
beneficial interest of The Nottingham Investment Trust (the "Trust"), formerly
known as Amelia Earhart Eagle Investments. The Trust, an open-end investment
company, was organized on August 12, 1992 as a Massachusetts Business Trust and
is registered under the Investment Company Act of 1940. The Fund began
operations on January 3, 1995. The Fund is currently authorized to issue two
classes of shares - Investor shares and Institutional shares.
Each class of shares has equal rights as to assets of the Fund, and the classes
are identical except for differences in their sales charge structures and
ongoing distribution fees. Income, expenses (other than distribution fees, which
are attributable to each class based upon a set percentage of its net assets),
and realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets. Investor shares purchased
are subject to a maximum sales charge of 3.50 percent. Both classes have equal
voting privileges, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular class. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at 4:00 p.m. New York
time on the day of valuation. Other securities traded in the
over-the-counter market and listed securities for which no
sale was reported on that date are valued at the most recent
bid price. Securities for which market quotations are not
readily available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.
B. Federal Income Taxes - No provision has been made for federal
income taxes since it is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal
income taxes.
C. Investment Transactions - Investment transactions are recorded
on the trade date. Realized gains and losses are determined
using the specific identification cost method. Interest income
is recorded daily on the accrual basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend
date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, on
a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net
realized gains through October 31 of that year. The Fund may
make a supplemental distribution subsequent to the end of its
fiscal year ended February 29, 1996.
E. Use of Estimates - Management makes a number of estimates in
the preparation of the Fund's financial statements. Actual
results could differ significantly from those estimates.
(Continued)
<PAGE>
The CarolinasFund
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Morehead Capital Advisors LLC.
(the "Advisor") provides the Fund with a continuous program of supervision of
the Fund's assets, including the composition of its investment portfolio, and
furnishes advice and recommendations with respect to investments, investment
policies, and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 1.00% of the Fund's
average daily net assets.
The Advisor has voluntarily agreed to reimburse expenses of the Fund if the
Fund's total expenses, exclusive of interest, taxes, brokerage commissions,
sales charges, and extraordinary expenses, exceed 2.25% of the average daily
value of Investor shares outstanding for any fiscal year, or exceed 1.75% of the
average daily value of Institutional shares outstanding for any fiscal year, or
the limits set by applicable state securities laws or other applicable laws if
such limits are lower.
Currently, the Fund does not offer its shares for sale in states which require
limitations to be placed on its expenses. The Advisor has voluntarily waived its
fee amounting to $11,386 ($0.12 per share) and has agreed to reimburse a portion
of the Fund's operating expenses for the fiscal year ended February 29, 1996.
The total fees waived and expenses to be reimbursed amounted to $80,634. There
can be no assurance that the foregoing voluntary fee waiver or expense
reimbursements will continue.
The Fund's administrator, The Nottingham Company (the "Administrator"), provides
administrative services to and is generally responsible for the overall
management and day-to-day operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its services, the
Administrator receives a fee at the annual rate of 0.20% of the Fund's first $50
million of average daily net assets, 0.175% on the next $50 million of average
daily net assets, and 0.15% on average daily net assets over $100 million. The
Administrator also receives a monthly fee of $2,750 for accounting and
recordkeeping services. Additionally, the Administrator charges the Fund for
servicing of shareholder accounts and registration of the Fund's shares. The
contract with the Administrator provides that the aggregate fees for the
aforementioned administration, accounting and recordkeeping services shall not
be less than $3,000 per month. The Administrator also charges the Fund for
certain expenses involved with the daily valuation of portfolio securities.
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. The Distributor receives any sales
charges imposed on purchases of shares and re-allocates a portion of such
charges to dealers through whom the sale was made, if any. For the year ended
February 29, 1996, the Distributor retained sales charges in the amount of
$5,198.
Certain Trustees and officers of the Trust are also officers or directors of the
Advisor or the Administrator.
(Continued)
<PAGE>
The CarolinasFund
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
NOTE 3 - DISTRIBUTION FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act of
1940 (the "Act"), adopted a distribution plan with respect to Investor shares
pursuant to Rule 12b-1 of the Act (the "Plan"). Rule 12b-1 regulates the manner
in which a regulated investment company may assume costs of distributing and
promoting the sales of its shares.
The Plan provides that the Fund may incur certain costs, which may not exceed
0.50% per annum of the Fund's average daily net asset value of Investor shares,
for each year elapsed subsequent to adoption of the Plan for payment to the
Distributor for items such as advertising expenses, selling expenses,
commissions, travel, or other expenses reasonably intended to result in sales of
Investor shares. The Fund incurred $3,791 of such expenses, net of a fee waiver,
under the Plan for the year ended February 29, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization and the
registration of its shares have been assumed by the Fund. The organization
expenses are being amortized over a period of sixty months. Investors purchasing
shares of the Fund bear such expenses only as they are amortized against the
Fund's investment income.
In the event any of the initial shares of the Fund are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro rata
portion of any unamortized organization expenses in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares of
the Fund outstanding at the time of the redemption.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases of investments other than short-term investments aggregated $1,605,570
during the year ended February 29, 1996. Other than short-term investments,
investments sold aggregated $170,800 during the year ended February 29, 1996.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
All distributions from net realized gain from investment transactions for the
year ended February 29, 1996 represent short-term capital gain distributions,
and are taxable as ordinary income to shareholders for federal income tax
purposes. Shareholders should consult a tax advisor on how to report
distributions for state and local income tax purposes.
<PAGE>
(KPMG Peat Marwick LLP logo)
Independent Auditors' Report
To the Board of Trustees and Shareholders
The Nottingham Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The CarolinasFund (the "Fund"), a series of The
Nottingham Investment Trust, as of February 29, 1996, the related statement of
operations for the year then ended, and the statements of changes in net assets
and financial highlights for the year ended February 29, 1996 and the period
from January 3, 1995 (commencement of operations) to February 28, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
The CarolinasFund as of February 29, 1996, the results of its operations for the
year then ended, and the changes in its net assets and financial highlights for
the year ended February 29, 1996 and the period from January 3, 1995
(commencement of operations) to February 28, 1995 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
April 5, 1996
April 30, 1996
Dear CarolinasFund Shareholder:
Your Fund ended the fiscal year on February 29, 1996 with an annualized total
return of 18.59% in Investor Class Shares. Institutional Shares, first issued
May 22, 1995, had a total investment return of 17.68% through the end of the
fiscal year.
Based on the strength and diversity of the Carolinas' economies, as reflected in
the Fund's portfolio, we remain optimistic that it will continue to reward our
shareholders.
The CarolinasFund is a modified index fund containing the 50 largest market
capitalization companies in North and South Carolina. Companies are ranked, or
indexed, quarterly according to market capitalization (share price times number
of shares outstanding). The amount invested in any company depends on its
percentage of the total market capitalization with no company receiving more
than 3% of total dollars available; The 15 biggest companies are capped at 3%.
As a result of this investment strategy, smaller companies are "overweighted",
taking advantage of their historical tendency to outperform large cap stocks.
Thank you for your confidence in The CarolinasFund. I trust it will continue to
be merited.
Bob Thompson
President
<PAGE>
THE CAROLINASFUND
INSTITUTIONAL SHARES
Performance Update - $10,000 Investment
For the period from May 22, 1995 (commencement of
operations) to February 29, 1996
[GRAPH APPEARS HERE]
CarolinasFund -
Date Intstitutional shares S&P 500 Index
22-May-95 10000 10000
31-May-95 10064 10186
31-Aug-95 11125 10730
30-Nov-95 11284 11561
29-Feb-96 11768 12230
THIS GRAPH DEPICTS THE PERFORMANCE OF THE CAROLINASFUND INSTITUTIONAL SHARES
VERSUS THE S&P 500 INDEX. IT IS IMPORTANT TO NOTE THAT THE CAROLINASFUND IS A
PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDEX IS NOT AVAILABLE FOR
INVESTMENT AND IS UNMANAGED. THE COMPARISON IS SHOWN FOR ILLUSTRATIVE
PURPOSES ONLY.
ANNUALIZED TOTAL RETURN
Commencement of operations through 2/29/96 23.44%
(bullet) The graph assumes an initial $10,000 investment at May 22, 1995.
All dividends and distributions are reinvested.
(bullet) At February 29, 1996, the Institutional Shares of the Fund would have
grown to $11,768 - total investment return of 17.68% since
May 22, 1995.
(bullet) At February 29, 1996, a similar investment in the S&P 500 Index would
have grown to $12,230 - total investment return of 22.30% since
May 22, 1995.
(bullet) Past performance is not a guarantee of future results. A mutual fund's
share price and investment return will vary with market conditions,
and the principal value of shares, when redeemed, may be worth more or
less than the original cost. Average annual returns are historical in
nature and measure net investment income and capital gain or loss from
portfolio investments assuming reinvestments of dividends.
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
<TABLE>
<CAPTION>
Value
Shares (note 1)
<S> <C> <C>
COMMON STOCKS - 96.86%
Beverages - 0.66%
Coca-Cola Bottling Company 400 $12,600
Building Materials - 2.22%
Martin Marietta Materials, Inc. 1,900 42,750
Commercial Services - 3.78%
(a) Quintiles Transnational Corporation 1,100 72,600
Computer Software & Services - 4.15%
(a) Medic Computer Systems, Inc. 500 33,750
(a) Policy Management Systems Corporation 900 46,012
79,762
Electrical Equipment - 4.37%
AVX Corporation 1,700 41,650
(a) Kemet Corporation 1,800 42,300
83,950
Electronics - Semiconductor - 0.31%
(a) Cree Research, Inc. 400 6,050
Entertainment - 1.57%
(a) Speedway Motorsports, Inc. 700 30,275
Financial Services - 0.37%
(a) World Acceptance Corporation 700 7,088
Financial - Banks, Commercial - 20.39%
CCB Financial Corporation 700 35,175
Centura Banks, Inc. 900 31,162
First Citizens BancShares, Inc. 400 23,800
First Union Corporation 1,200 72,600
NationsBank Corporation 1,000 73,750
Southern National Corporation 2,100 58,800
United Carolina Bancshares 1,050 26,775
Wachovia Corporation 1,500 69,750
391,812
Food - Processing - 0.75%
Lance, Inc. 900 14,400
Forest Products & Paper - 2.50%
Bowater, Inc. 1,300 48,100
</TABLE>
(Continued)
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
<TABLE>
<CAPTION>
Value
Shares (note 1)
<S> <C> <C>
COMMON STOCKS (Continued)
Insurance - Life & Health - 5.49%
Jefferson-Pilot Corporation 1,350 $75,094
Liberty Corporation 900 30,487
105,581
Insurance - Property & Casualty - 3.11%
Integon Corporation 700 14,000
United Dominion Industries, Ltd. 1,900 45,838
59,838
Iron & Steel - 2.80%
Nucor Corporation 1,000 53,875
Manufactured Housing - 2.55%
Oakwood Homes Corp 1,100 49,087
Medical - Hospital Mgmt & Service - 0.14%
(a) Coastal Physician Group 200 2,600
Packaging & Containers - 3.04%
Sonoco Products Company 2,135 58,446
Real Estate - 0.42%
(a) Insignia Financial Group, Inc. 400 8,150
Real Estate Investment Trust - 1.56%
Highwoods Properties, Inc. 600 18,000
Summit Properties, Inc. 600 12,075
30,075
Restaurants & Food Service - 0.62%
(a) Ryan's Family Steak Houses, Inc. 1,800 11,925
Retail - General Merchandise - 2.36%
Family Dollar Stores, Inc. 3,300 45,375
Retail - Grocery - 3.89%
Food Lion, Inc. 9,700 53,956
Ruddick Corporation 1,900 20,900
74,856
Retail - Specialty Line - 4.49%
(a) Baby Superstore, Inc. 800 33,700
Lowe's Companies, Inc. 1,700 52,700
86,400
Telecommunications - 1.95%
(a) Vanguard Cellular Systems, Inc. 1,700 37,400
</TABLE>
(Continued)
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
<TABLE>
<CAPTION>
Value
Shares (note 1)
<S> <C> <C>
COMMON STOCKS (Continued)
Telecommunications Equipment - 7.42%
(a) BroadBand Technologies, Inc. 100 $2,450
(a) Glenayre Technologies, Inc. 1,925 84,941
SCANA Corporation 2,000 55,000
142,391
Textiles - 7.31%
(a) Burlington Industries, Inc. 3,000 34,125
(a) Collins & Aikman Corporation 2,800 18,550
(a) Cone Mills Corporation 800 9,100
Guilford Mills, Inc. 500 10,500
Springs Industries, Inc. 400 17,300
Unifi, Inc. 2,100 50,925
140,500
Utilities - Electric - 6.72%
Carolina Power & Light Company 1,800 65,700
Duke Power Company 1,300 63,538
129,238
Utilities - Gas - 1.92%
Piedmont Natural Gas Company, Inc. 1,200 27,000
Public Service Company of North Carolina, Inc. 600 9,900
36,900
Total Common Stocks (Cost $1,660,731) 1,862,024
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
REPURCHASE AGREEMENT (b) - 3.19%
Wachovia Bank $61,370 61,370
5.23%, due March 1, 1996
(Cost $61,370)
Total Value of Investments (Cost $1,722,101) 100.05% 1,923,394
Liabilities In Excess of Other Assets (0.05)% (1,004)
Net Assets 100.00% $1,922,390
</TABLE>
(a) Non-income producing investment.
(b) Joint repurchase agreement entered into February 29, 1996, with a
maturity value of $68,302,116 collateralized by $71,660,000 U.S.
Treasury Bills, due September 19, 1996. The aggregate market value
of the collateral at February 29, 1996 was $69,697,130. The Fund's
pro rata interest in the market value of the collateral at February
29, 1996 was $62,658. The Fund's pro rata interest in the joint
repurchase agreement collateral is taken into possession by the
Fund's custodian upon entering into the repurchase agreement. The
collateral is marked to market daily to ensure its market value is
at least 102 percent of the sales price of the repurchase agreement.
(Continued)
<PAGE>
The CarolinasFund
PORTFOLIO OF INVESTMENTS
February 29, 1996
(c) Aggregate cost for federal income tax purposes is $1,722,188.
Unrealized appreciation (depreciation) of investments for federal
income tax purposes is as follows:
Unrealized appreciation $249,160
Unrealized depreciation (47,954)
Net unrealized appreciation $201,206
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996
ASSETS
Investments at value (cost $1,722,101) $1,923,394
Receivable for fund shares sold 9,650
Dividends receivable 4,050
Interest receivable 230
Other assets 257
Due from advisor (note 2) 1,821
Deferred organization expenses, net (note 4) 35,680
Total assets 1,975,082
LIABILITIES
Payable for investment purchases 36,411
Accrued professional fees 8,500
Accrued expenses 7,781
Total liabilities 52,692
NET ASSETS $1,922,390
NET ASSETS CONSIST OF:
Paid-in capital $1,720,832
Undistributed net realized gain on investments 265
Net unrealized appreciation on investments 201,293
$1,922,390
INVESTOR CLASS
Net asset value ($1,897,814 (division sign) 152,513
shares outstanding) $12.44
Maximum offering price per share (100 (division sign)
96.5 of $12.44) $12.89
INSTITUTIONAL CLASS
Net asset value and offering price per share ($24,576
(division sign) 1,955 shares outstanding) $12.57
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
STATEMENT OF OPERATIONS
Year ended February 29, 1996
INVESTMENT INCOME
Income
Dividends $22,903
Interest 2,476
Total income 25,379
Expenses
Fund accounting fees (note 2) 29,250
Professional fees 14,107
Investment advisory fees (note 2) 11,386
Custody fees 8,150
Distribution fees (note 3) 5,651
Fund administration fees (note 2) 4,120
Securities pricing fees 3,056
Registration and filing administration fees 1,422
Shareholder recordkeeping fees 1,208
Amortization of deferred organization expenses (note 4) 9,326
Trustee fees and meeting expenses 7,199
Shareholder servicing expenses 4,551
Registration and filing expenses 2,588
Printing expenses 1,614
Other operating expenses 3,493
Total expenses 107,121
Less:
Expense reimbursements (note 2) (69,248)
Investment advisory fees waived (note 2) (11,386)
Distribution fees waived (note 3) (1,860)
Net expenses 24,627
Net investment income 752
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 3,855
Increase in unrealized appreciation on investments 190,112
Net realized and unrealized gain on investments 193,967
Net increase in net assets resulting from operations $194,719
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the
period from
January 3, 1995
(commencement
Year ended of operations) to
February 29, February 28,
1996 1995
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income $752 $987
Net realized gain from investment transactions 3,855 0
Increase in unrealized appreciation on investments 190,112 11,181
Net increase in net assets resulting from operations 194,719 12,168
Distributions to shareholders from
Net investment income - Investor Class (1,987) 0
Net investment income - Institutional Class (1) 0
Net realized gain from investment transactions - Investor Class (3,336) 0
Net realized gain from investment transactions - Institutional Class (5) 0
Decrease in net assets resulting from distributions (5,329) 0
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 1,460,617 260,215
Total increase in net assets 1,650,007 272,383
NET ASSETS
Beginning of period 272,383 0
End of period $1,922,390 $272,383
</TABLE>
(a) A summary of capital share activity follows:
<TABLE>
<CAPTION>
INVESTOR CLASS INSTITUTIONAL CLASS
Year ended For the period from For the period from May 22, 1995
February 29, 1996 January 3, 1995 to (commencement of operations)
February 28, 1995 to February 29, 1996
Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C>
Shares sold 135,220 $1,540,284 25,836 $260,215 1,954 $23,186
Shares issued for reinvestment
of distributions 329 3,765 0 0 1 6
135,549 1,544,049 25,836 260,215 1,955 23,192
Shares redeemed (8,872) (106,624) 0 0 0 0
Net increase 126,677 $1,437,425 25,836 $260,215 1,955 $23,192
</TABLE>
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
INVESTOR INVESTOR INSTITUTIONAL
CLASS CLASS CLASS
For the For the
period from period from
January 3, 1995 May 22, 1995
(commencement (commencement
Year ended of operations) to of operations) to
February 29, February 28, February 29,
1996 1995 1996
<S> <C> <C> <C>
Net asset value, beginning of period $10.54 $10.00 $10.72
Income from investment operations
Net investment income 0.01(a) 0.04 0.02
Net realized and unrealized gain on investments 1.95 0.50 1.88
Total from investment operations 1.96 0.54 1.90
Distributions to shareholders from
Net investment income (0.03) 0.00 (0.02)
Net realized gain from investment transactions (0.03) 0.00 (0.03)
Total distributions (0.06) 0.00 (0.05)
Net asset value, end of period $12.44 $10.54 $12.57
Total return 18.59%(b) 5.40%(d) 17.68%(c)
Ratios/supplemental data
Net assets, end of period $1,897,814 $272,383 $24,576
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 9.45% 37.10%(e) 8.40%(e)
After expense reimbursements and waived fees 2.17% 2.21%(e) 1.69%(e)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (7.21)% (32.27)%(e) (6.07)%(e)
After expense reimbursements and waived fees 0.06% 2.62%(e) 0.64%(e)
Portfolio turnover rate 16.35% 0.00% 16.35%
</TABLE>
(a) Calculation based upon average shares outstanding for the year.
(b) Total return does not reflect payment of a sales charge.
(c) Annualized total return is 23.44%.
(d) Total return does not reflect payment of a sales charge. Annualized
total return was 35.20%
(e) Annualized.
See accompanying notes to financial statements
<PAGE>
The CarolinasFund
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The CarolinasFund (the "Fund") is a non-diversified series of shares of
beneficial interest of The Nottingham Investment Trust (the "Trust"), formerly
known as Amelia Earhart Eagle Investments. The Trust, an open-end investment
company, was organized on August 12, 1992 as a Massachusetts Business Trust and
is registered under the Investment Company Act of 1940. The Fund began
operations on January 3, 1995. The Fund is currently authorized to issue two
classes of shares - Investor shares and Institutional shares.
Each class of shares has equal rights as to assets of the Fund, and the classes
are identical except for differences in their sales charge structures and
ongoing distribution fees. Income, expenses (other than distribution fees, which
are attributable to each class based upon a set percentage of its net assets),
and realized and unrealized gains or losses on investments are allocated to each
class of shares based upon its relative net assets. Investor shares purchased
are subject to a maximum sales charge of 3.50 percent. Both classes have equal
voting privileges, except where otherwise required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular class. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at 4:00 p.m. New York
time on the day of valuation. Other securities traded in the
over-the-counter market and listed securities for which no
sale was reported on that date are valued at the most recent
bid price. Securities for which market quotations are not
readily available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.
B. Federal Income Taxes - No provision has been made for federal
income taxes since it is the policy of the Fund to comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal
income taxes.
C. Investment Transactions - Investment transactions are recorded
on the trade date. Realized gains and losses are determined
using the specific identification cost method. Interest income
is recorded daily on the accrual basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend
date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, payable in March, June, September and December, on
a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net
realized gains through October 31 of that year. The Fund may
make a supplemental distribution subsequent to the end of its
fiscal year ended February 29, 1996.
E. Use of Estimates - Management makes a number of estimates in
the preparation of the Fund's financial statements. Actual
results could differ significantly from those estimates.
(Continued)
<PAGE>
The CarolinasFund
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Morehead Capital Advisors LLC.
(the "Advisor") provides the Fund with a continuous program of supervision of
the Fund's assets, including the composition of its investment portfolio, and
furnishes advice and recommendations with respect to investments, investment
policies, and the purchase and sale of securities. As compensation for its
services, the Advisor receives a fee at the annual rate of 1.00% of the Fund's
average daily net assets.
The Advisor has voluntarily agreed to reimburse expenses of the Fund if the
Fund's total expenses, exclusive of interest, taxes, brokerage commissions,
sales charges, and extraordinary expenses, exceed 2.25% of the average daily
value of Investor shares outstanding for any fiscal year, or exceed 1.75% of the
average daily value of Institutional shares outstanding for any fiscal year, or
the limits set by applicable state securities laws or other applicable laws if
such limits are lower.
Currently, the Fund does not offer its shares for sale in states which require
limitations to be placed on its expenses. The Advisor has voluntarily waived its
fee amounting to $11,386 ($0.12 per share) and has agreed to reimburse a portion
of the Fund's operating expenses for the fiscal year ended February 29, 1996.
The total fees waived and expenses to be reimbursed amounted to $80,634. There
can be no assurance that the foregoing voluntary fee waiver or expense
reimbursements will continue.
The Fund's administrator, The Nottingham Company (the "Administrator"), provides
administrative services to and is generally responsible for the overall
management and day-to-day operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its services, the
Administrator receives a fee at the annual rate of 0.20% of the Fund's first $50
million of average daily net assets, 0.175% on the next $50 million of average
daily net assets, and 0.15% on average daily net assets over $100 million. The
Administrator also receives a monthly fee of $2,750 for accounting and
recordkeeping services. Additionally, the Administrator charges the Fund for
servicing of shareholder accounts and registration of the Fund's shares. The
contract with the Administrator provides that the aggregate fees for the
aforementioned administration, accounting and recordkeeping services shall not
be less than $3,000 per month. The Administrator also charges the Fund for
certain expenses involved with the daily valuation of portfolio securities.
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. The Distributor receives any sales
charges imposed on purchases of shares and re-allocates a portion of such
charges to dealers through whom the sale was made, if any. For the year ended
February 29, 1996, the Distributor retained sales charges in the amount of
$5,198.
Certain Trustees and officers of the Trust are also officers or directors of the
Advisor or the Administrator.
(Continued)
<PAGE>
The CarolinasFund
NOTES TO FINANCIAL STATEMENTS
February 29, 1996
NOTE 3 - DISTRIBUTION FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act of
1940 (the "Act"), adopted a distribution plan with respect to Investor shares
pursuant to Rule 12b-1 of the Act (the "Plan"). Rule 12b-1 regulates the manner
in which a regulated investment company may assume costs of distributing and
promoting the sales of its shares.
The Plan provides that the Fund may incur certain costs, which may not exceed
0.50% per annum of the Fund's average daily net asset value of Investor shares,
for each year elapsed subsequent to adoption of the Plan for payment to the
Distributor for items such as advertising expenses, selling expenses,
commissions, travel, or other expenses reasonably intended to result in sales of
Investor shares. The Fund incurred $3,791 of such expenses, net of a fee waiver,
under the Plan for the year ended February 29, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization and the
registration of its shares have been assumed by the Fund. The organization
expenses are being amortized over a period of sixty months. Investors purchasing
shares of the Fund bear such expenses only as they are amortized against the
Fund's investment income.
In the event any of the initial shares of the Fund are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro rata
portion of any unamortized organization expenses in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares of
the Fund outstanding at the time of the redemption.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases of investments other than short-term investments aggregated $1,605,570
during the year ended February 29, 1996. Other than short-term investments,
investments sold aggregated $170,800 during the year ended February 29, 1996.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
All distributions from net realized gain from investment transactions for the
year ended February 29, 1996 represent short-term capital gain distributions,
and are taxable as ordinary income to shareholders for federal income tax
purposes. Shareholders should consult a tax advisor on how to report
distributions for state and local income tax purposes.
<PAGE>
(KPMG Peat Marwick LLP logo)
Independent Auditors' Report
To the Board of Trustees and Shareholders
The Nottingham Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The CarolinasFund (the "Fund"), a series of The
Nottingham Investment Trust, as of February 29, 1996, the related statement of
operations for the year then ended, and the statements of changes in net assets
and financial highlights for the year ended February 29, 1996 and the period
from January 3, 1995 (commencement of operations) to February 28, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
The CarolinasFund as of February 29, 1996, the results of its operations for the
year then ended, and the changes in its net assets and financial highlights for
the year ended February 29, 1996 and the period from January 3, 1995
(commencement of operations) to February 28, 1995 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
April 5, 1996
